Global risk management survey: Risk management in the spotlight

Deloitte

Description

The sixth edition of Deloitte's biannual survey on risk managment practices and trends of financial services companies from around the word. The report helps to understand why the creation of a risk-aware culture, supported by specific methodologies, tools, and governance structures, is necessary for financial institutions to meet the competitive challenges ahead.

Sujets

• Surveyor 3

Informations

• Publié par: deloitte
• Nombre de lectures: 327
• Langue: English
• Poids de l'ouvrage: 2 Mo

Extrait

Financial Services

Global Risk
Management Survey:
Sixth Edition
Risk management
in the spotlight

Contents

Foreword

Executive summary

Introduction

Risk governance

Enterprise risk management

Basel II

Management of key risks
•
Credit risk
•
Market risk
•
Liquidity risk
•
Operational risk
Risk management systems and technology infrastructure

Conclusion

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Foreword

Dear Colleague,
We are pleased to present the sixth edition of Deloitte’s
Global Risk Management Survey
.
This edition is titled
Risk management in the spotlight
because the current turbulent
conditions—including business volatility, a lack of liquidity in many inancial markets, and
a worldwide economic downturn—are bringing the importance of risk management front
and center, perhaps as never before.
The systemic risk to the global inancial system posed by these and other recent
developments have substantially raised the demands placed on both regulators and
risk managers. Today, many institutions have a Chief Risk Oficer or similar senior-level
executive responsible for assessing and managing risk across their institution. Boards of
directors at many irms have properly assumed overall responsibility for the oversight of
risk management. In the banking sector, preparations for compliance with the Basel II
requirements are nearing completion, while in the insurance industry similar preparations
are being made for Solvency II.
Yet, much work remains to be done. Many boards of directors and senior management
teams will likely seek additional education and training on risk management. Institutions
may need to create a more risk-aware culture, further infusing risk management into
performance objectives and business decisions. Many institutions still may need to
implement enterprise risk management programs to gain a more comprehensive view
of the risks they face. More sophisticated methodologies will likely be adopted by many
institutions to manage the risks in today’s more complex environment, such as “tail risks”
from unlikely events and the risks from a lack of liquidity.
Deloitte’s survey provides an assessment of how inancial services companies around the
world are responding to these realities and the key risk management challenges they face.
The survey includes responses from 111 inancial institutions worldwide with more than $19
trillion in total assets, and we would like to express our appreciation to all that participated.
We hope that the survey results presented in this report will provide you with useful
information on how inancial institutions are meeting the challenges facing risk
management today and will facilitate a broader dialogue on the steps that may be needed
to enhance risk management in the future.
Sincerely,
Edward T. Hida II, CFA
Global Leader - Risk & Capital Management
Global Financial Services Industry Practice
Deloitte Touche Tohmatsu

As used in this document, “Deloitte” means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about
for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.

Global Risk Management Survey: Sixth Edition
Risk management in the spotlight i

Executive summary

Risk management today is in the spotlight, being tested Value at Risk (VaR) has been considered by many to be the
by unprecedented turbulence in the inancial markets, industry-accepted methodology for assessing market risk,
including depressed asset prices, reduced liquidity in but its limitations in assessing the risks of extremely rare
many markets, and a contraction in the credit markets. events, often called “tail risks,” have become apparent.
The changed marketplace has affected every segment of Institutions may need to further supplement the use of VaR
the inancial services industry including banks, insurance with other methodologies such as stress tests. The high
companies, and asset management irms. While the degree of correlation across asset classes, risk categories,
conluence of these events has challenged risk management and geographies revealed in times of stress may need
within inancial irms, these events have also demonstrated to be factored into portfolio management decisions and
the need for enhanced risk management capabilities and enterprise-level capital needs.
reiterated a basic principle – risk and return are generally
correlated and should be evaluated together.
Key indings
•Riskmanagementisnotfullyintegratedthroughout
Boards of directors at many institutions may need to many institutions: 49 percent of the institutions
continue their efforts to become more actively involved surveyed had completely or substantially incorporated
in understanding the risks within the business, approving responsibilities for risk management into performance
organizational risk appetite and tolerance, and providing goals and compensation decisions for senior
increased oversight over business decision-making and management.
the consideration of relevant risk management issues.
Management may require more comprehensive metrics and
•Overallresponsibilityforoversightandgovernanceof
tools to adequately assess all the risks inherent in the range risks rested with the board of directors at 77 percent of
of complex products. And institutions may need to more the institutions participating, and 63 percent of these
fully recognize and effectively manage liquidity risk, which had a formal, approved statement of risk appetite.
has aflicted the markets for securitized products as well as
•Seventy-threepercentoftheinstitutionssurveyedhad
the broader inancial markets.a Chief Risk Oficer (CRO) or equivalent position. As an
indicator of the role’s importance, the CRO reported to
The sixth edition of Deloitte’s
Global Risk Management
the board of directors and/or the CEO at roughly three
Survey
examined these and other challenges facing global quarters of these institutions.
inancial institutions. The survey received responses from
•Only36percentoftheinstitutionshadanenterprise
111 inancial institutions around the world, with aggregate risk management (ERM) program, although another 23
assets of more than $19 trillion. percent were in the process of creating one. Among
institutions with $100 billion or more in assets, 58
Since our last report issued in early 2007, the economic percent had an ERM program already in place. The
environment has changed dramatically. Risk management institutions that had ERM programs found them to be
has always been a core competency of inancial institutions, valuable: 85 percent of the executives reported that
but the extraordinary developments in the inancial the total value (both quantiiable and non-quantiiable)
markets and the broader economy that began in late derived from their ERM programs exceeded costs.
2007 have made it an even greater priority. The volatility
•Institutionshavemadesubstantialprogresstowards
of the inancial markets is placing a premium not only complying with Basel II. For many areas, more than
on risk management systems that can consistently assess half of the institutions subject to Basel II reported they
risk, but also on those that help institutions to identify had already complied or that little work remained,
and monitor emerging risks and react quickly. This implies a far higher number than in our previous global risk
that institutions may need a more robust, integrated IT
infrastructure that can quickly achieve a broad picture of management surveys. These responses are clearly
risk across multiple lines of business, portfolios, products, inluenced by the fact that Basel II has different
timeframes for implementation in different countries,
and geographies.
with multiple approaches available in many jurisdictions.

Global Risk Management Survey: Sixth Edition
Risk management in the spotlight 1

•Economiccapitalcontinuestobewidelyused,with83
percent of the institutions reporting that they calculated
economic capital and 53 percent saying that their
boards of directors and senior management used these
calculations to assist in strategic decision making.
•Roughly80percentoftheinstitutionsemployedstress
tests for their banking and trading books, although
a smaller amount, 58 percent, reported performing
stress tests of their structured product (or securitization
and related transaction) exposures. Among institutions
that conducted stress tests of their structured product
exposures, only 17 percent conducted them daily, while
68 percent conducted these tests quarterly or less often.
Given the pace at which markets move, institutions
may face regulatory or other pressure to perform stress
testing more frequently.
•Regulatoryauthoritieshavebeenencouraginginancial
institutions to independently validate their risk-related
models, to better enable them to assess reliably the
likelihood and magnitude of potential risks,